The stranger bits of Finance Bill 2012: from cricket to Islamic finance

THE FINANCE BILL 2012 was published yesterday by Minister for Finance Michael Noonan and among the Mortgage Interest Relief measures and tax changes for businesses, the Bill also clarified the following (more unusual) elements of Irish taxation:

1. Bread

The Finance Bill 2012 clarifies the range of bread products, including bagels and blaas, which will not be liable for VAT and will instead remain designated at a zero rate of tax.

Other flour- or egg-based bakery products are subject to VAT of 13.5 per cent.

The Department of Finance said that the breads listed above are being designated zero-rated for tax in an effort to reflect the kinds of bread currently available on the market while taking into account the development of bread for health and ethnic reasons.

2. Cricket

The Finance Bill had some good news for professional cricket players: they are being added to the list of professional sportspersons entitled to tax relief on certain income.

The move also means that the cricketers will be eligible for a higher rate of relief on pension contributions.

They must be resident in the state for the relevant tax assessment period to qualify and the deduction only applies to direct sports earnings (less expenses) and not for indirect income earned through promotional appearances or sponsorship.

3. Islamic Finance

The Finance Bill also includes enhancements to the tax regime for Islamic finance.

This area of finance in Ireland, which although faith-based is not limited to Muslims, was introduced in the Finance Act 2010, and refers to financial transactions which are consistent with the principles of Islamic or Sharia law.

Under Islamic finance, the payment and receipt of interest is forbidden. Speculation is also prohibited, while investment in unethical businesses, products or services is also banned. According to the Revenue Commissioners, under Islamic finance, transactions are typically backed by or based on an identifiable and tangible underlying asset.

The transactions also involve sharing risk between the investor and the investee, and products under Islamic finance operate along the same lines as conventional financial products by using familiar legal structures in an alternative way to achieve the financing objectives.

The Finance Bill published yesterday proposes technical changes to certain Islamic financial transactions in the same way as conventional financial transactions by allowing such a company to have other income in addition to income from leasing and/or income from specified financial transactions.